That brings us to Edgewater. In brief, my position is that I respect the decisions the City makes with respect to the use of a TID, but just don’t ask the School District to subsidize a project. To my mind, the School District would be subsidizing a project if, using appropriate valuation techniques, we conclude that the value of potential property tax revenue foregone as a result of investment in a project exceeds the value of potential additional property tax revenue the project is expected to generate.
In other words, for a project like Edgewater, there is a City investment. This investment can be measured in terms of property tax revenues foregone. Using an appropriate discount rate, we can place a present value on that stream of foregone property tax revenues. Let’s call that present value X.
A project like Edgewater will result in increased property values and so in increased future property tax revenues. We can also place a present value on the projected future stream of increased property tax revenues the project generates. Let’s call that present value Y.
If Y > X, then the project makes financial sense and, generally, there is no reason for the School District to complain about it. However, if X > Y, then the deal is a financial loser, and the School District would in effect be called upon to subsidize the shortfall in revenues.
So, for Edgewater, is X > Y, or Y > X? Fortunately, City Comptroller Dean Brasser and his staff have provided helpful data that allow us to address that question.
The City says that without the Edgewater amendment, TID #32 is projected to close in 2017. With the closure, the increment in value in the properties included within the TID would be restored to the property tax rolls. This addition would result in a broader base of property value from which to collect property taxes, and so would result in a property tax decrease for all other property owners, all else equal. The City calculates that, in the absence of the Edgewater amendment, the closure of TID # 32 in 2017 would result in a property tax savings on the average Madison home of about $35, beginning in 2018.
The Madison School Board voted unanimously Monday against supporting an expansion of the State Street tax incremental financing (TIF) district that would deliver $16 million in public assistance to the proposed $98 million Edgewater hotel redevelopment.
School board member Lucy Mathiak, the school district’s representative to the city’s TIF Review Board, cast doubt on school board approval last month, when she said that taking more properties off the tax rolls for the Edgewater project would be difficult for local taxing entities, such as Madison public schools, to bear.